QCP: Bitcoin Fails to Gain Safe Haven Appeal, Participants Still Lean Defensive Until a Clearer Picture Emerges

Update on April 16th

On April 16th, QCP issued its daily market observation report, stating that the United States showcased its strength and strategic edge policy by adopting a deterrence tactic through the exaggeration of tariff numbers. Nevertheless, just as the market was bracing for the impact, the U.S. government granted tariff exemptions and "invited" China to return to the negotiation table.

Why this sudden transformation? The bond market began to send warning signals. The yield on the 10-year U.S. Treasury bond soared to 4.6%, and the yield on the 30-year U.S. Treasury bond broke through 5%, disrupting risk sentiment. If Trump wishes to drive a stock market rebound during his tenure, long-term yields must decline rather than rise.

The sell-off in the bond market intensified the pressure for Fed intervention. It now appears to be approaching a turning point. Last week, the Fed indicated its preparedness to take action to stabilize financial conditions. Governor Waller further emphasized this shift, hinting that the Fed's focus is turning to recession risks and subtly downplaying the persistent inflation issue, now characterizing it as "transitory."

The Fed has previously attached the "transitory" label to various inflation cycles, which have far from been temporary. However, the Fed's defense mechanism is gradually coming into play. The market now expects 3.5 rate cuts by 2025. Meanwhile, as geopolitical tensions escalate, gold continues to rise. With U.S. Treasuries and the U.S. dollar losing some of their traditional safe-haven appeal, gold has now become the market's preferred store of value.

In contrast to gold, Bitcoin has not witnessed a safe-haven demand. The narrative of "alternative store of value" has not gained traction in the current macro environment. Market participants' stance still leans towards defense. They are still focused on hedging against downside risks until a clearer picture emerges.